Contract analysis

I. Executive Summary The purpose of this memorandum is to provide an internal review and analysis of the existing Enterprise License Agreement, Agreement No. MDS-ELA-2023-00487, dated February 1, 2023 (the "Original ELA"), between Optiwave Semiconductor Corp. ("OWS" or the "Client") and Meridian Design Systems, Inc. ("Meridian" or "MDS"). This analysis is intended to identify key provisions of the Original ELA, asses

II. Background A. The Parties Licensee — Optiwave Semiconductor Corp. OWS is a Delaware corporation headquartered at 4850 Great America Parkway, Suite 300, Santa Clara, California 95054. OWS is a fabless semiconductor design company specializing in the development of high-speed optical transceiver integrated circuits and silicon photonics chiplets for data-center interconnect applications. Founded in 2017, OWS has gr

III. Summary of Key Terms of the Original ELA This section provides a detailed review of the material provisions of the Original ELA, organized by subject matter. Where applicable, we have included observations and preliminary recommendations for the renewal negotiation. A. Term and Effective Date The Original ELA has an effective date of February 1, 2023, and a contractual term of three (3) years, resulting in an ex

1. Meridian Marlowe Asset Management™ — A comprehensive digital IC design suite encompassing place-and-route functionality, logic synthesis, static timing analysis, and physical design verification. Marlowe Asset Management™ is OWS's primary design platform and is used by the majority of OWS's design engineers across all active tapeout programs.

2. Meridian SignalForge™ — A signal integrity analysis toolset used for high-speed I/O characterization, electromagnetic simulation, power integrity analysis, and interconnect modeling. SignalForge™ is particularly critical to OWS's optical transceiver design programs, where signal integrity at data rates exceeding 100 Gbps per lane is a first-order design constraint.

3. Meridian VerifyPro™ — A formal verification platform supporting equivalence checking, model checking, and assertion-based verification. VerifyPro™ is used in conjunction with OWS's simulation-based verification flows to achieve coverage closure on complex digital designs. The Original ELA does not include licenses for Meridian AnalogEdge™ (an analog and mixed-signal design suite) or Meridian PhotonX™ (a silicon ph

Section 9.1 of the Original ELA provides that Meridian will defend, indemnify, and hold harmless OWS from and against any third-party claims, actions, suits, or proceedings alleging that OWS's authorized use of the licensed software, as contemplated by the agreement, infringes any United States patent, copyright, or trade secret. This indemnification obligation extends to damages, settlements, costs, and reasonable a

I. Limitation of Liability Aggregate Liability Cap. Section 10.1 of the Original ELA limits each party's total aggregate liability under the agreement (whether arising in contract, tort, strict liability, or any other theory) to the amount of fees paid or payable by OWS in the twelve-month period immediately preceding the event giving rise to the claim. Under the current fee structure, this cap is $9.2 million — equa

Section 12.1 of the Original ELA grants Meridian the right to conduct software compliance audits to verify OWS's compliance with the licensed seat count, permitted use restrictions, and other terms of the agreement. Current Provision. Under the Original ELA, Meridian may conduct up to two (2) software compliance audits per calendar year. Each audit requires not less than fifteen (15) calendar days' prior written noti

IV. Provisions Targeted for Renegotiation — Priority Ranking Based on our review of the Original ELA and our discussions with OWS's legal and engineering teams, we have identified the following provisions as targets for renegotiation in the renewal. We have organized these items into three tiers based on their relative priority to OWS. A. High Priority The following items represent OWS's most critical negotiation obj

1. Pricing and Fee Structure. OWS's top priority is to reduce the annual license fees from Meridian's proposed $14.3 million per year to OWS's target of $11.8 million per year. The renewal redline should propose a volume-discount structure providing at least 15% off Meridian's list price for all licensed modules, reflecting the significant 47.4% increase in total seat count (from 190 to 280 seats). The target effecti

2. IP Indemnification. OWS should seek uncapped IP indemnification — removing Meridian's IP indemnification obligation from the general aggregate liability cap. The carve-outs to the indemnification obligation should be narrowed, particularly the combination-use exception, which must be revised to exclude combinations of the licensed software with products and technologies that are contemplated by the parties, reflec

3. Limitation of Liability. The general aggregate liability cap should be increased from 1× to 2× annual fees. The following additional carve-outs from the aggregate cap should be added: (a) IP indemnification obligations (uncapped); (b) data breach and data security obligations (uncapped, or subject to a separate elevated cap of at least 3× annual fees); and (c) willful misconduct and willful breach (uncapped, with

4. Audit Rights. The audit provision should be revised to: (a) reduce the maximum audit frequency from two per calendar year to one per calendar year (and no more than one audit during any rolling twelve-month period); (b) increase the required notice period from fifteen (15) calendar days to thirty (30) business days; (c) eliminate or reduce the 10% surcharge for overuse (or, at minimum, apply the surcharge only to

5. Source Code Escrow. The Original ELA does not include a source code escrow arrangement, which represents a material business-continuity gap. Given OWS's critical dependence on Meridian's EDA tools — which constitute nearly half of OWS's total annual EDA spend — a technology escrow arrangement is essential to protect OWS in the event of Meridian insolvency, sustained material breach, or discontinuation of a license

6. Seat Expansion Mechanics. The renewal should accommodate the addition of 90 seats (expanding the total from 190 to 280, with 220 named-user seats and 60 floating seats). In addition to the day-one seat expansion, OWS should negotiate a mechanism for future mid-term seat additions at pre-negotiated rates during the five-year term. This mechanism should specify the per-seat pricing for incremental seats (ideally at

7. Product Expansion. The renewal should add licenses for two new Meridian product modules: Meridian AnalogEdge™ (analog and mixed-signal design suite) and Meridian PhotonX™ (silicon photonics design kit integration platform). For AnalogEdge™, which is already on the Brindoval AEPL as of September 22, 2025, activation should be immediate upon the renewal effective date. For PhotonX™, which is not yet on the Brindoval

8. Cloud Services and SLA. If OWS adds Meridian CloudVerify™ to the renewal, the agreement must include comprehensive cloud services terms. We recommend documenting these in a standalone Data Security and Cloud Services Rider, to include: (a) a 99.5% monthly uptime SLA with tiered service credits for downtime (e.g., 5% credit for uptime between 99.0% and 99.5%; 10% credit for uptime between 98.0% and 99.0%; 25% credi

9. Transition Period. As discussed in Section III.K above, OWS should negotiate a transition provision providing for continued use of the licensed tools for at least ninety (90) days following the expiration or termination of the renewal ELA, at the then-current fee rate (prorated monthly or daily), while the parties negotiate in good faith toward a successor agreement. This provision should also address the immediat

10. Dispute Resolution. As discussed in Section III.M above, the binding arbitration clause should be evaluated in the context of OWS's overall risk profile and preferences. If arbitration is retained, we should consider updating the reference to the applicable JAMS rules (to reflect the most current version), revisiting the fee-allocation provisions (to include a prevailing-party attorneys' fees provision), and pote

11. Assignment and Change of Control. As discussed in Section III.N above, the assignment provision should be clarified to confirm that transactions involving Ridgeline Capital Partners (whether a sale of Ridgeline's equity stake in OWS, a sale of OWS to a third party, or a recapitalization) do not trigger Meridian consent requirements. The renewal should include express language providing that a change in the direct

12. Residuals Clause. As discussed in Section III.G above, the residuals clause should be narrowed to exclude insights related to OWS's specific design architectures, process technology choices, and competitive strategies, or eliminated entirely. At minimum, the clause should include an express prohibition on Meridian's use of residual knowledge to benefit OWS's direct competitors.

13. Confidentiality. The mutual confidentiality provisions should be updated to address cloud-hosted data security and aligned with the proposed Data Security and Cloud Services Rider discussed in item 8 above. The survival period should be reviewed in light of the extended five-year renewal term; OWS may wish to extend the post-termination confidentiality survival period from three years to five years, consistent wi

14. Termination for Convenience. OWS should consider whether to seek the inclusion of a termination-for-convenience right exercisable by OWS upon twelve (12) months' prior written notice given at any time after the third anniversary of the renewal effective date (i.e., after February 1, 2029). Such a right would be subject to an early-termination fee structured as a declining percentage of the remaining TCV (e.g., 50

V. Interplay with Brindoval PDK License Agreement A critical consideration in the renewal negotiation is the interplay between the Meridian ELA and OWS's existing relationship with Brindoval Foundry Services Ltd. ("Brindoval"), OWS's primary foundry partner for silicon photonics and advanced packaging technologies. OWS is party to a PDK License Agreement with Brindoval (Reference No. CFS-PDK-2023-US-0034), dated Marc